The Organization of the Petroleum Exporting Countries (OPEC) dropped a major bomb for the crude market this Thursday. Investors were baffled when the crude exporting group said that the world oil demand would plateau in the late 2030s.
According to the block, international demand could gradually decline from that point onwards. The major shift in the market marks the long-term impact of the coronavirus on the economy and consumer market.
The prediction of the group was included in its 2020 World Oil Outlook reports. And it also comes as the market grows more and more concerned for the tipping point of the demand.
Experts agreed with the group’s forecast saying it is indeed possible that the pandemic will be the crude market’s downfall.
OPEC said that crude oil demand can climb up to 107 million barrels per day in 2030. That is a significant increase from the 90.7 million barrels per day this 2020.
However, it is still 1.1 million barrels per day lower compared to its prior forecasts last year. And more than 10 million barrels per day lower from the 2007 prediction for 2030.
An expert commented saying that if the economic slump doesn’t get better, the outlook for demand could look bleaker.
The 2020 World Oil Outlook looks at the time span of 2019 to 2045.
The report said that the demand would still grow healthily during the first half of the timespan. But OPEC said that it could plateau or even gradually decline in the latter half of the timespan.
Looking at it, oil is used to fuel various vehicles that are still in demand today and the industry will rebound along with the economies. However, the group has concerns about the adjustments brought by the coronavirus pandemic.
Among the shifts should be the increase of homeworking and teleconferencing instead of physical meetings and offices. The increase in demand for electric vehicles has already heightened the concerns for the oil industry’s outlook.
Even before the coronavirus, climate change activism has grown exponentially in the West. With this, the rise of alternative fuels started to take off.
OPEC clarified that despite scaling back, it still sees growth in the industry’s future. The scenario feared by the block is the Accelerated Policy and Technology case. And it is not based on any huge technological breakthroughs.
Also, it also doesn’t represent a dramatic demand reduction. Of course, the pandemic will have lasting effects on the industry, and some may be irreversible.